PostCapitalism-_Paul-Mason_-_z-library.sk_-1lib.sk_-z-lib.sk_

The world moved from exchange rates fixed against the dollar and gold to totally free-floating currencies. From then on, the global banking system was effectively creating money out of nothing.

With this change, each stricken country was temporarily free to solve the underlying problems of productivity and profitability in ways the old system had made impossible: with higher state spending and lower interest rates. The years 1971–3 were lived in a kind of nervous euphoria.

The inevitable stock market crash hit Wall Street and London in January 1973, triggering the collapse of several investment banks. The oil shock of October 1973 was the final straw.

CARRY ON KEYNES

By 1973, every aspect of the unique regime that had sustained the long boom was broken. But the crisis looked accidental: low input prices destroyed by OPEC; global rules ripped up by Richard Nixon; profits eroded by that figure of loathing, the ‘greedy worker’.

The iconic British Carry On movie franchise chose this moment to switch from ludicrous historical parodies to an attempt at razor-sharp social commentary. Carry On At Your Convenience (1971), set in a toilet factory, satirizes a world in which workers control production, where managers are incompetent, and where sexual freedom is transforming life even on the small-town factory floor. The subtext of Carry On At Your Convenience is that the present system is ludicrous: we can’t go on, but we don’t seem to have an alternative. This, it turned out, was the subtext of the policy response as well.

After 1973, governments tried to fix the system by applying the old, Keynesian rules harder. They used price and wage control policies in an attempt to suppress inflation and appease worker unrest. They used state spending – and borrowing on an increased scale to maintain demand in the face of the slump. But though growth recovered after 1975, it could never reach its old levels.

During the late 1970s, the Keynesian system destroyed itself. This destruction was not just the work of policymakers but of all the players in the Keynesian game: the workers, the bureaucrats, the technocrats, the politicians.

Working-class militancy had already moved out of the factory and into the arena of bargaining nationally with the government. In the mid-1970s, in almost every country the attention of trade union leaders was focused on national wage agreements, price controls, social reform programmes, together with strategies that would maintain their grip over specific sectors – such as the British dockers’ attempt to resist container technology. The ultimate aim of labour movements in the developed world became to put in power leftist social-democratic governments that would permanently guarantee Keynesian policies.

But by this time the business class and key politicians of the right had walked away from the Keynesian world altogether.

THE ATTACK ON LABOUR

It has become commonplace to think that the triumph of globalization and neoliberalism was inevitable. But it was not. Their emergence was just as much the result of government action as corporatism and fascism had been in the 1930s.

Neoliberalism was designed and implemented by visionary politicians: Pinochet in Chile; Thatcher and her ultra-conservative circle in Britain; Reagan and the Cold Warriors who brought him to power. They’d faced massive resistance from organized labour and they’d had enough. In response, these pioneers of neoliberalism drew a conclusion that has shaped our age: that a modern economy cannot coexist with an organized working class. Consequently, they resolved to smash labour’s collective bargaining power, traditions and social cohesion completely.

Unions had come under attack before – but always from paternalist politicians who had proffered the lesser of two evils: in place of militancy, they’d encouraged a ‘good’ workforce, defined by moderate socialism, unions run by agents of the state. And they helped build stable, socially conservative communities that could be the breeding ground for soldiers and servants. The general programme of conservatism, and even fascism, had been to promote a different kind of solidarity that served to reinforce the interests of capital. But it was still solidarity.

The neoliberals sought something different: atomization. Because today’s generation sees only the outcome of neoliberalism, it is easy to miss the fact that this goal – the destruction of labour’s bargaining power – was the essence of the entire project: it was a means to all the other ends. Neoliberalism’s guiding principle is not free markets, nor fiscal discipline, nor sound money, nor privatization and offshoring – not even globalization. All these things were byproducts or weapons of its main endeavour: to remove organized labour from the equation.

Not all the industrialized countries followed the same path, nor at the same pace. Japan had blazed the trail for flexible working in the 1970s by introducing small-team work into production lines, through individual wage bargaining and shouted propaganda sessions in the factory. Of all the advanced economies, Japan was the only one to successfully rationalize industrial business models after 1973. There was of course resistance, dealt with in a brutal fashion – by taking out the ringleaders and beating them physically every day until resistance stopped. ‘It is as though the “company world” were immune from the law of the state,’ wrote the Japanese leftist Muto Ichiyo, who witnessed some of these beatings. ‘And it is natural that in this company world, workers, petrified with horror, their free thinking frozen, keep their mouths shut.’²⁸

Germany, by contrast, resisted labour reforms until the early 2000s, preferring instead to create a peripheral migrant workforce in low-grade service and construction jobs alongside the paternalistic world of the

production line. For this it was branded the ‘sick man of the euro’ by The Economist magazine, which as late as 1999 lamented its ‘bloated welfare system and excessive labour costs’.²⁹ These were eradicated in the Harz II labour reforms (2003), which have now left Germany a highly unequal society, with many of its communities gripped by poverty.³⁰

Many developed countries took advantage of the recession of the early 1980s to impose mass unemployment. They adopted policies overtly designed to make the recession deeper: they hiked interest rates, sending old industrial businesses to the wall. They privatized or closed large swathes of coal, steel, auto and heavy engineering production owned by the state. They banned the wildcat and solidarity actions that had plagued managers in the boom years. But they did not, yet, try to dismantle welfare systems; these were needed to maintain social order in communities whose hearts had been ripped out.

The attack on organized labour was punctuated by signal moments. In 1981, the US air traffic control union leaders were arrested, paraded in chains, and the entire workforce sacked for taking strike action. Thatcher used paramilitary policing to destroy the miners’ strike in 1984–5. But the anti-labour offensive’s true success was on a moral and cultural level. From 1980 onward, in the developed world, strikes diminished and so did union density. In the USA, union membership fell from an already low 20 per cent of the workforce in 1980 to 12 per cent by 2003, the survivors heavily clustered in the public sector.³¹ In Japan it went from 31 per cent to 20 per cent, and in the UK the fall was even more spectacular, from 50 per cent to 30 per cent.³²

With the unions sidelined, the transformation of work could begin in earnest, creating the atomized and precarious workforce of today. Those of us who lived through the defeat of organized labour in the 1980s experienced it as traumatic, but told ourselves that our grandfathers had lived through just the same. But if we step back and look at it through the kaleidoscope of long-wave theory, it is in fact unique.

The 1980s saw the first ‘adaptation phase’ in the history of long waves where worker resistance collapsed. In the normal pattern, outlined in

chapter 3, resistance forces the capitalists to adapt more radically, creating a new model based on higher productivity and higher real wages. After 1979, the workers’ failure to resist allows key capitalist countries to find a solution to the crisis through lower wages and low-value models of production. This is the fundamental fact, the key to understanding everything that happens next.

The defeat of organized labour did not enable – as the neoliberals thought – a ‘new kind of capitalism’ but rather the extension of the fourth long wave on the basis of stagnant wage growth and atomization. Instead of being forced to innovate their way out of the crisis using technology, as during the late stage of all three previous cycles, the 1 per cent simply imposed penury and atomization on the working class.

Across the Western world the wage share of GDP fell markedly. The economist Engelbert Stockhammer, surveying the damage for the International Labour Organization, showed that this fall in the wage share had been driven entirely by the impact of globalization, financialization and reductions in welfare provision. He wrote: ‘This constitutes a major historical change as wage shares had been stable or increasing in the postwar era.’³³

That, as it turns out, is an understatement. It was to trigger the reshaping of the world.

THE DISRUPTED WAVE IN PICTURES

When change is massive and obvious but takes place over decades, twodimensional charts are sometimes the clearest way to see the big picture. The graphs that follow indicate very clearly what does and does not fit the classic pattern predicted by Kondratieff. They can also give us a clue as to why.

1. World GDP growth

The chart above shows the overall shape of the fourth long wave at a single glance. There’s a clear phase change in the early 1970s. Using the IMF definition of a global recession – when the growth rate dips below 3 per cent – there were no recessions for the first twenty-five years of the wave and six after 1973, the last one a humdinger.³⁴

1. Interest rates³⁵

Kondratieff measured his waves using interest rates, and for the post-1945 period there is no clearer metric than this one: the average interest rates banks charge to companies and individuals in the USA. Interest rates rose gradually during the long boom, spiked in the early 1980s – when high interest rates were used to wipe out swathes of the old industries – and have gradually declined, flatlining at the end of the graph because of quantitative easing. Kondratieff’s colleagues, who’d seen this exact pattern in all the previous cycles, would have concluded: ‘Comrade, that’s a long wave.’

1. Commodity prices: nickel

However, Kondratieff also tracked the prices of basic commodities, such as coal and iron. This graph tracks the price of a modern equivalent, nickel – a key component of stainless steel – over fifty-seven years. I think it would have knocked Kondratieff off his chair. It’s only one commodity but with just a few exceptions, it is fairly representative of what has happened to raw material prices since 1945: there is always a spike to the right of the graph, caused by the rapid development of industry and mass consumption in the global south, above all in China.

A 2007 report by the US Geological Survey shows how, after 1989, all industrial metal prices were driven upwards by China’s entry into the global marketplace.³⁶ China’s nickel usage goes from 30 kt in 1991 to 60 kt in 2001 to 780 kt in 2012. By contrast, over the same period most other major producers’ consumption of nickel and other metals rises fairly slowly, with Germany going from 80 kt to 110 kt.\*

Kondratieff didn’t measure government debt, but in a modern nation it is a good indicator of the economy’s overall health. The chart above shows the debt of states compared to their annual GDP. Financial repression combined with inflation wiped out their war debts over twenty-five years of sustained growth. Then, in the face of crisis from 1973 onwards, the advanced world was forced to raise its debts relentlessly. This debt piles up close to 100 per cent of GDP, despite three decades of welfare cuts and privatization receipts.

1. Money in circulation

This is Exhibit A in the story of fiat money, money not backed by gold. The graph starts from the moment Nixon abolished Bretton Woods in 1971, and shows the volume of money in circulation in ninety countries, in different forms, ranging from cash, which barely changes, to credit and financial instruments, which grow steadily in the neoliberal era and take off massively after 2000.³⁸

Nixon had detached money and credit from the underlying reality and, although it took decades to create a financial system that could exploit this freedom to the full, from the late 1990s the rate of increase becomes steep.

1. Inequality

The dark line shows the real income of the 99 per cent over the fourth long wave. It had already doubled during the Second World War, as people moved from farms to factories, and doubled again between the war and the oil shock. Then it grows very slowly for the whole period after 1989. But for the 1 per cent it is the opposite: the downswing of the cycle is immensely lucrative. Having plateaued during the boom and the crisis